I have never seen this and cannot find anything in the FAR/DFAR/AFAR/Policy that says you should or should not fund. Any help or direction you can give me would be much appreciated!
This response is based on the information provided. We suggest you discuss with your contracting team, program manager and/or legal department as appropriate.
Open full Question Details
Given the limited information provided, we offer the following. It appears this is sole source in response to a government request within an on-going contract. Contractors have a right to charge time to respond to government requests for cost proposals. How a contractor charges is a function of its disclosure statement (if it has one). We presume this contractor has a disclosure statement if the requested prep costs are over $2M. Based on the disclosure statement does the company charge proposal costs (as opposed to bid and proposal costs which occur before and contract exists) directly or indirectly? If direct, are all employees charging to the effort direct charge employees; they are the only employees that should be direct charging. Is this going to be in the cost or fixed price category of contracts?
Are all costs in the request allowable, allocable, and reasonable? At $2M, there may be some costs that do not belong. What guidance, boundaries did the government provide in requesting the company to submit a proposal? There should not have been a high level of fidelity in submitting an NTE number. Although many companies treat Rough Order of Magnitude and/or NTE requests the same as a formal proposal. You did not mention the UCA/NTE cost, is this 1% or 10% of the cost of the proposed work?
While companies have a right to charge the government for preparation of cost proposals, you have some negotiating to do to ensure the costs are allowable, allocable, and reasonable.